By Nancy Trejos
Washington Post Staff Writer
Sunday, March 2, 2008
Bill Kirst overpaid his MasterCard bill last month by $500.
The 29-year-old District resident wanted to tell someone about his silly mistake, which he said he made because he was eager and able to get out of debt. So he logged onto the "money confessions" board at personal finance Web site Geezeo.com.
"whoops, i overpaid my credit card," he wrote to the Web site's 20,000 users, signing it as "anonymous."
His confession accompanied others such as these:
"I'm 30k in debt brought on by my depression and anxiety. my biz has slowed down and my husband has no idea i owe all this money."
"none of my coworkers or friends know that I'm sitting on $300k of savings at 28 years old."
"I am so broke American Express called and said 'Leave home without it!' "
Money used to be a taboo subject. Not anymore, thanks to Web sites such as Facebook and MySpace, which have created a generation willing to talk about anything and everything online. Several new sites are incorporating that impulse into the world of money, blending social networking with personal finance.
"It comes from the whole MySpace generation. Once people become comfortable being social online, it extends into other areas, such as personal finance," said Ryan Williams, co-founder of NetworthIQ, which allows people to publicly keep track of their assets.
The online communities focus on different aspects of personal finance, from investing to budgeting to borrowing and lending money. But the founders of the sites all say they are trying to accomplish the same thing: to get people to make better financial decisions.
Too many people in their 20s and 30s have become addicted to their debit and credit cards, no longer carrying cash in favor of the convenience of plastic, said Peter Glyman, who co-founded Geezeo about a year ago.
That has made them "detached from their finances," he said. "They're not balancing a checkbook, which in some ways forces people to look more closely at their finances. It creates a problem for the consumer in that they're becoming further removed, but it allowed products like ours to get them closer."
Sites such as Geezeo and Wesabe.com, which launched in November 2006 and has about 100,000 users, act as online versions of Quicken or Microsoft Money, allowing people to upload their bank and credit card information to track their spending. On Geezeo, users can also set goals such as "Reduce spending by ¿" and "Save $2,000 in an Emergency Fund" and encourage each other to accomplish them.
Similarly, on Wesabe, members can join groups to share strategies. Want to find a way to eat good food without going broke? Join "Frugal Foodies." Worried that you're spending too much on your pet? Maybe "Can you Afford Your Pets?" is the group for you. There is also a "Wealthy Wesabe" group for people trying to decide what to do with their money and a "Poor Wesabe" group for people trying to decide what to do without much money. A "tips" section has lively discussions on such topics as "How I reduced my phone bill from $100 to $17 a month."
Although being able to open up about finances is not a bad thing, financial planners say users should be leery about taking advice from people they don't know. Most participants on these personal finance sites do not reveal their names.
"What I always tell people before you take someone else's advice: Make sure you know what qualifies them to give you the advice . . .," said Karen Schaeffer, president of Schaeffer Financial in Rockville. "There' s value in conversation because it makes you think about the issue, but nobody really knows you. Or you don't know that person. If you really knew them, you'd realize: 'Whoa. That person is worse off than I am. Why am I listening to them?' "
The founders of the sites acknowledge that their users are generally not getting expert advice but say users can learn from each other's mistakes or successes.
"People don't like to talk about money, especially when they have money problems. They don't like admitting it to their family and friends," said Shawn Ward, a co-founder of Geezeo. "With a social site based on personal finance, which is your most personal thing . . . it's a way to not feel alone. Not a whole lot of it is advice. It's more about experiences."
Yet experts say people should think hard before putting personal information on the Web. "What's public? What's private?" asked Jim Bruene, editor of the Online Banking Report, an industry newsletter.
The type of information that users give varies. Geezeo, for one, asks for usernames and passwords to bank, credit card, mortgage and investment accounts, then pulls the information into its systems daily. The user provides his or her ID and password only once, and neither is stored, said Glyman.
Jason Knight, co-founder of Wesabe, said his company has a Data Bill of Rights that spells out how data are used. Users are not asked to enter their bank or credit card passwords. Instead, they download a program onto their computers that keeps their passwords and uploads data from their accounts. Wesabe does not store any passwords, and all accounts are stripped of personal identifiers, such as names and e-mail addresses. For those who want compete control of their data, they can extract the information themselves and manually upload transactions.
Despite the security concerns, Bruene said the Web sites will probably continue to grow. They already have 400,000 to 500,000 users and will probably pass 1 million by the end of the year, he said. He expects more than 10 million users within the next decade.
Kirst, a consultant for IBM, began using Geezeo about six months ago after stumbling upon its Facebook group. He has paid off his car loan, does not usually carry a credit card balance, has no mortgage and has set aside a big chunk of money for retirement. When he was a student at Johns Hopkins University, he was a victim of identity theft. Someone in a mailroom filled out a credit card offer in his name and bought a used Jaguar, he said. That has made him obsessed with keeping his finances in order.
"I think it kind of just gives people the opportunity to say, 'There are some other people I can reach out to,' " he said. "I think it's great that people can say, 'Hey, I'm in debt.' "
Kirst decided to post his confession about overpaying his credit card bill because he wanted to show that it's possible to get out of debt.
"It was kind of my way of saying if this is what I have to confess about, it's not all bad news," he said.
Others have opted for niche sites. Some, such as Covestor.com, allow investors to see how their portfolios compare with others. Social lending sites, such as Lending Club and Prosper, bypass banks to match lenders with borrowers. Buxfer.com and BillMonk.com help roommates, friends and relatives keep logs of shared expenses. NetworthIQ helps people figure out in a public forum what they are worth in dollars.
Owen Graham, 33, a systems administrator for a computer science corporation, wanted to figure out how well he was doing compared with others in his age and income bracket. So he joined NetworthIQ about a year ago. He learned that he and his wife, who is not a member of the site, are worth about $400,000 if you include their house in Olney, their 401(k)s and other retirement and savings accounts.
Each month, he updates his profile with information about how much he spent and saved. He said the site has made him less of a spender and more of a saver. "Now I'm really paying attention," he said. "It's one of those things that keeps me motivated in trying to head in the right direction. I would have no idea how much I had in retirement at any given time, and now I'm pretty cognizant of what's in there and how the markets are doing."
Brian Zacharias, 23, a senior economics major at the University of Virginia, was very aware of how he was doing and wanted others to know it. That's why he opted for Covestor, which launched last summer. His portfolio is up 40 percent since he joined.
"I like to let other people know how well I'm doing and put that information out to the public," he said. "I turned out to be a good trader, and I want people to know about it."
Zacharias said he likes that he can track other investors' moves, then ask why they bought or sold a particular stock. "They could have made a good decision, or they could have just been lucky," he said. "I like the concept of posting your rationale."
Some people, such as Phyllis Wright, 48, are just looking for a way out of debt. The customer-services representative who lives in Clinton borrowed $9,000 from the Lending Club to pay off some of her credit cards. "I knew that I had so much debt that I didn't even bother to try to get a loan from the bank because I knew I would have been turned down," she said.
She got a 12 percent interest rate, much lower than the rate she had on her credit cards. She had been paying her credit cards about $450 a month. Now she pays Lending Club $301. She still has credit card debt, but "that was a big help," she said.
Since September, when the Lending Club expanded from a Facebook group to a public Web site, it has issued about $9.5 million in loans, said Renaud Laplanche, founder and chief executive. Last month alone, it doled out about $3 million. Laplanche attributed the rapid growth to the credit crunch that has squeezed the mortgage market and seeped into other forms of lending.
Laplanche said borrowers must have a minimum 640 credit score, no more than a 30 percent debt-to-income ratio and no delinquencies. To minimize risk, lenders make small loans to each person. That way, if one recipient defaults, lenders are still likely to get a return from their investments in other people's loans. So far, Laplanche said, fewer than 1 percent of all loans have been in default.
"People tend to not default on other people in a community if they feel connected," he said.